Congress’s Diminishing Power of the Purse

One of the most important aspects of the separation of powers is the commitment of the power of the purse to the legislative branch. It constrains the executive and the judiciary from engaging in unilateral action without congressional approval. If there’s no approval, there will be no money to pay for the executive action, as the rule would have it. Unsurprisingly, with the advent of the administrative state and an aggressive executive, this power has been significantly diminished in modern times

Indeed, Article I, Section 8 of the Constitution provides expressly that “[t]he Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts,” to the exclusion of any other branch’s exercise of those powers. The upshot: the separation of powers, especially Congress’ power over appropriation priorities, is eroded as executive agencies and executive allies have access to funds not appropriated by Congress.

In order to keep their power of the purse intact, Congress originally enacted the Miscellaneous Receipts Statute in 1849. That law is now codified today in Title 31 of the U.S. Code. It requires all government officials in receipt of funds, such as settlements from civil or criminal enforcement, to deposit that money with the Treasury. As a structural point, the law effectively aims at stopping executive agencies from self-funding through enforcement or other receipts of money. It maintains their dependence on Congress for their annual appropriation.

However, the Justice Department has found a way around this law to fund political allies on the left or executive priorities without congressional approval: settlement agreements. As Wall Street Journal columnist Kimberley Strassel recently reported, “[i]t works like this: The Justice Department prosecutes cases against supposed corporate bad actors. Those companies agree to settlements that include financial penalties. Then Justice mandates that at least some of that penalty money be paid in the form of “donations” to nonprofits that supposedly aid consumers and bolster neighborhoods.”

The trick here is that Justice never “receives” the funds within the meaning of the Miscellaneous Receipts Statute, and thus has no requirement to deposit the funds it exacts from defendants with the Treasury—the donations are made directly without money ever being received into Justice’s hands.

Despite the fact that Justice Guidance discourages the practice because “it can create actual or perceived conflicts of interest and/or other ethical issues”—and, indeed, it was almost banned in 2008 due to perceptions of abuse—Justice continues to push this method of funding political allies and favored priorities of the executive. In fact, “[i]n 2011 Republicans eliminated the Housing Department’s $88 million for ‘housing counseling’ programs,” Strassel reports, “which spread around money to groups like La Raza. Congress subsequently restored only $45 million, and has maintained that level. . . [B]ank settlements pour some $30 million into housing counseling groups, thereby essentially restoring all the funding.”

Not only are many of the charitable groups benefitting from this rule left-wing activist organizations like the National Council of La Raza or the National Urban League, but many times defendants are given double credit for these donations, receiving $2 towards the total penalty in the settlement for each $1 given to nonprofits. Hundreds of millions of dollars have been funneled to left-leaning groups by this method.

Congress’ power of the purse is effectively curtailed by the end-run of the Miscellaneous Receipts Act. As my colleague Ilya Shapiro and I pointed out in a recent National Review article, this comes on the heels of a several-year-long effort by Justice to reduce the level of culpability required to hold corporate managers responsible for actions of the company. The easier it is to prosecute, the easier it is to force a big settlement.

But the problem is broader, for not only have Congress’s appropriations powers been diminished by aggressive agencies, but Congress itself has all but abdicated its power over the purse through modern budgetary practices.

Since 2001, Congress has funded the federal government not through the traditional 12 separate appropriations bills covering various sets of executive branch agencies, but through an unending series of Continuing Resolutions, or CRs—omnibus statutes that extend the previous year’s entire federal budget with broad percentage adjustments. As the Hudson Institute’s Christopher DeMuth recently noted:

The CR surrenders Congress’s power of the purse. When Congress is appropriating individual agencies, it can adjust program spending and policy elements on a case-by-case basis. It doesn’t always get its way in the face of a possible presidential veto, but at least Congress is in the game, with a multitude of tactics and potential compromises in play. In contrast, the threat of shutting down the entire government is disproportionate to discrete policy disagreements. The tactic would be plausible only in the rare case where congressional opinion amounted to veto-proof majorities in both chambers.

There are ways to fix this. Rep. Bob Goodlatte (R-Va.) introduced legislation that passed the House and is pending in the Senate to end the settlement slush fund Justice has created. More important still, Congress can return to its earlier practice of passing separate appropriations measures rather than Continuing Resolutions, thereby taking back its control of budget priorities.  Constitutional government requires nothing less than a restoration of the separation of powers.